OLA to NACHA: Online Lenders and Loans are Legal

Posted on September 3, 2013

Posted by: Jeff Brownlee

The group that runs the Automatic Clearing House (ACH) system is asked to clarify its letter to banks and processors

August 20, 2013 (Washington, D.C.) – The Online Lenders Alliance (OLA) is asking NACHA, The Electronics Payments Association, to clarify a recent letter it sent to banks that may have been misinterpreted by banks as a direction to stop processing payments for legal online lenders.

The NACHA letter was sent in response to cease and desist orders issued by the New York State Department of Financial Services (NYSDFS) designed to pressure banks and payment processors to stop processing customer authorized transactions with legal online lenders. NACHA is an association of banks that makes the rules for the electronic payments system.

In a letter from OLA President and CEO Lisa McGreevy she explains how “… the authorizations obtained by members of the Online Lenders Alliance (“OLA”) are clear, understandable and valid under applicable legal requirements. This issue is critically important to our members, and we would welcome the opportunity to meet with you and discuss our Members’ lending and authorization process, as well as their valid regulatory structure.”

The letter further explains to NACHA that OLA member companies, which include lenders, vendors and third party payment processors, agree to operate under a strict Code of Conduct and abide by industry leading Best Practices including the requirement that they obtain clear and readily understandable authorizations.

McGreevy’s letter also cautioned NACHA not to allow the ACH system to be used to prohibit the sale of products or services that are legal and necessary for consumers: “This is not the first time that state regulators or legislators have sought to effect social policy or execute their ‘pet projects’ through the payments system and it will not be the last, but NACHA needs to stand firm for the security of the payments system and consumer sovereignty,” the letter concludes. “OLA members provide their ODFIs with validly authorized payment instructions in connection with transactions freely sought and entered into by consumers.”

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The Online Lenders Alliance is a professional trade organization representing the growing industry of companies offering consumers small, short-term loans online. OLA member companies abide by a list of Best Practices and Code of Conduct to ensure that customers are fully informed and fairly treated.